I don't understand what counterparty risk has to do with money/currency distinction? Counterpaty risk is the probability of not getting good or services you have paid for or not getting the money if you're the seller. If I hold a gold coin in my hand or I''m the only one that knows the private keys of a bitcoin address then there is no counterparty risk and I'm 100% confident that I received payment for goods or services I sold.
It doesn't matter how many members one organization has - two or five or 50. You have to define what do you mean by "secured by"? I'm using "depends on". Doesn't depend on means if that organization of two or five or 50 members disappears this asset was and still is money if it still has value. If the value of this asset goes to zero then it was currency before losing its value as it was backed by a second asset that disappeared. The distinction is very clear. If something is backed by nothing and is used as money then it is money!
Until 1971 the US dollar was currency. It was a certificate giving you the right to convert it into gold as it was pegged to gold. After gold window was closed the US dollar became money. Yes, that's right! If you present a 100 dollar bill to the Fed they will not redeem it as they don't have any obligation whatsoever. If Fed disappears the US dollar will still have value IF it is scarce and has limited supply! I'd even say that without Fed the value of US dollar will increase.
Becoin there is nothing wrong with defining currency the way you do but that is not the only way to define it nor is it particularly enlightening to define it that way. If you look up how currency is defined in the dictionary you will see a different definition. r0ach upthread uses yet another definition.
Far more useful is to focus on the necessary properties that allow money/currency to function in its role of facilitating trade and savings.
Everything has counterparty risk even physical gold or bitcoins for which you control the private keys.
For those situations where you have physical control of the an asset the counterparty risk is the social network which uses and accepts said asset. If you accept silver, gold, dollars or bitcoin as payment for services rendered you are taking a risk that the networks of individuals who accept these things will continue to exist in the future allowing you to someday exchange these things later for future goods and services. The stronger and more robust the network the lower the counterparty risk.
